Survey Results Show Little Appetite for Major Changes to the New Zealand Tax System

“Most New Zealanders do not want to see spending cut from Working for Families, KiwiSaver, interest free student loans, “20 Hours Free” early childhood education and New Zealand Superannuation, despite predictions showing that programmes like these are unsustainable long-term,” says a Researcher at Maxim Institute, Steve Thomas.

According to the results of a UMR poll commissioned by Maxim Institute this year, the vast majority of New Zealanders are opposed to those cuts in spending and also opposed to a land tax, and opposed to an increase in GST, even if personal income taxes are reduced at the same time.

“The popularity of Government spending on these programmes reflects a common principle, that once spending is introduced it is very hard to remove. In 2004, Government operating spending was at 30% of GDP. It is now at 36%. Any money the government spends has to be earned by ordinary New Zealanders. We should think very carefully bout whether these programmes are of good quality and worth their cost, says Thomas.

“Costly, poor quality government spending is a drag on the economy and is unsustainable in the future,” says Steve Thomas. “Forecasts show that in the next five or so years, the government will be spending more than it collects in revenue. Any predicted spending drops do not counter predicted revenue drops..”

“People’s concern about the prospect of cutting some of the money being spent on these services is understandable. But we have to be realistic about the shape of spending and growth in New Zealand,” says Thomas. “We cannot continue on the same path we have been following for the past six years, on which government spending as a shre of DP has grown steadily.

Steve Thomas also advocates for a move towards GST and away from high personal income taxes. "Increasing our reliance on GST holds out genuine advantages. There is obviously significant concern about a GST increase and that concern deserves to be acknowledged,” says Thomas. “But a GST change is likely to encourage more investment and saving and stimulate capital formation. A rebalanced tax system offers real benefits for all of us, in the shape of economic growth and better living standards.

“The Government needs to make a commitment to improving the tax system, even if it costs them some popularity for a time. They must also clearly explain the case for the changes, to the electorate."

This UMR polling data relates to some of the key recommendations in a report also being released today by Maxim Institute, titled “Lifting the Bucket: Tax policy and economic growth.” The report, authored by Steve Thomas, makes a series of recommendations about how to improve New Zealand’s tax system, including raising GST, limiting Government spending and introducing a two-step system for personal income taxes.

ENDS

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